Three Steps to Break a Car Lease Without Getting Rear-Ended

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As I mentioned in the video above, there are lots of things in life that are fairly simple to fall into, but much more complicated to extricate yourself from. Three examples? Marriage, the Army… and a car lease.

When I started doing consumer news 20 years ago, there was basically no way to get out of a car lease: either you paid it off (add up the total monthly payments remaining and send a check to the leasing company) or run an ad in the local paper on the off-chance you’d find someone both willing and able to take over your payments.

Internet to the rescue. These days you can go to any number of websites that will help you find someone who can assume your lease. Here are five examples:

These sites are essentially matchmakers, pairing those who want out of a lease with those who want in. They’re your best hope if you need to bail early – really your only hope. And if you’ve got automotive ADD, they can also be a great way to drive a short-term car bargain.

Step one: can you get out of your lease?

Not all leases allow you an early exit, even if you can find someone willing to take your place. So step one is to pull out your paperwork, grab a magnifying glass and start combing through the fine print. If you can’t find language that addresses lease assumption or transfer, call your leasing company and ask them.

If you can legally transfer your lease, it shouldn’t have a negative effect on your credit history.

According to this article from Edmunds.com, about 80% of leases are transferable with no strings attached. Another 10% are assumable with only one string attached, albeit a major one: you can transfer the lease, but you remain at least partially liable. The final 10% don’t allow transfers at all.

It’s not advisable to attempt to get out of a lease if you’re going to remain liable, and it’s a waste of time to list it if it can’t be transferred, so do this first. And even if your lease is assumable, keep in mind the person you’re transferring it to will still have to qualify and be approved in advance by the leasing company. Obviously, your car will also have to be in tip-top condition.

Step two: get ready to pay some fees

There’s cost involved in transferring a lease. Your leasing company will probably charge a transfer fee, and the website you list it on will also ask for a piece of the pie. But it shouldn’t be a deal killer – generally less than $1,000 total. These fees can be paid by the one getting out of the lease, the one getting in, or they can be split.

In order to make your lease attractive to potential shoppers, however, you may also have to “buy down” the payments. For example, if you have 12 payments of $500 each left on your lease, to make your car stand out you might offer to put up $1,200 to effectively bring the monthly payments down to $400. Whether you’ll have to add incentives depends entirely on how attractive your existing lease terms are, how badly you want out, how sought-after your car is, and how many miles you have remaining on the lease.

Step three: good-buy, then good-bye

Once you know your lease is fully assumable and you’ve scraped up the money to pay the fees involved, it’s time to pick a site and list your car. Start by comparing sites – the more cars they have listing the better – then compare ads for cars as similar as possible to yours. The goal is to make your deal the most competitive by making your car the most attractive, both physically and financially. As you browse ads, cut and paste wording you like. Once you’ve decided on a site, prepare your own ad, put it up… and wait. But if you’ve got the right car at the right payment with lots of miles left on the lease, you might not be waiting long.

Is this a good way to “buy” my next car?

Obviously, lease-swapping wouldn’t work if there weren’t a lot people looking to get into leases this way. What’s the appeal? In the case of the guy we interviewed in the above video, a short-term lease with a lot of miles left to burn was ideal. He drives a lot for work, so he couldn’t deal with the traditional 12,000 – 15,000 mile caps found in most new-car leases. The Infinity lease he took over with less than a year left still had 20,000 miles to go before it was over the limit. For him, perfect.

As I mentioned above, taking over short-term leases also allows for variety, as well as the opportunity to buy the car at a specified price at the end of the lease. It can get you into a car with very little – even no – down payment, if you can get the person who’s leaving the lease to pay the transfer and other fees. And with today’s lousy economy, there are plenty of people who desperately need to get out from under that monthly obligation, so there are plenty of hard bargains to drive.

But before you travel this road, stop, look and listen. If you don’t have great credit, your odds of assuming a lease aren’t great either. Make sure you thoroughly read and understand any lease you intend to assume. Be on the lookout for turn-in or lease-end charges. Understand that you’re assuming the full responsibility for damage and wear and tear – have the car professionally examined.

The big lease-swapping sites will provide a lot of the services you’ll need: vehicle inspection and history, credit pre-qualification, even vehicle shipping. They also offer a lot of information – information you’ll want to read and understand before you get into, or out of, a lease this way.

But for those who need to dump a lease in a hurry at a relatively low cost, this is one way to do it. And also something to keep in mind the next time you step into a lease showroom: only agree to an assumable lease – you never know.

Now… where’s the website that lets you swap your way out of marriage or the Army?

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